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UPDATE 1-Goldman Sachs Brazil chief downplays sovereign risk downgrade

Guillermo Parra-Bernal and Natalia Gomez
Friday, 1 Nov 2013 | 11:29 AM ET

SAO PAULO, Nov 1 (Reuters) - Brazil faces no imminent risk of losing its sovereign investment-grade debt ratings over the next 18 months, Paulo Leme, chairman of Goldman Sachs Group Inc in Brazil, said on Friday.

He sees a solid economy in spite of inflation and exchange rate volatility.

While not ruling out the risk for a potential rating action, Leme said policies that enhance predictability and transparency could reduce the likelihood of a downgrade or further outlook revisions in the near-term.

Brazil is rated Baa2 by Moody's Investors Service and BBB by Standard and Poor's and Fitch Ratings- the second-lowest investment-grade rating.

Despite recent actions by Moody's and S&P, which lowered their outlooks on Brazil's investment-grade ratings, "we are facing no imminent economic problems...we're not in a crisis-like mode," Leme said.

"What we need is to eliminate uncertainties and implement policies that eliminate the risk of a downgrade," he added.

Earlier in October, Moody's lowered the outlook on Brazil's Baa2 sovereign debt rating to "stable" from "positive," citing the impact of years of low growth, flagging investment and swelling debt.

Moody's and its peers have stressed that government debt trends are deteriorating: Brazil's gross debt equals almost 60 percent of gross domestic product, compared with median ratios of 45 percent for Baa2-rated countries.

Leme's remarks, made at an event sponsored by Brazil's investment banking and mutual funds association Anbima, come amid growing concerns that the country's economy is lagging behind other emerging market countries.

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